WAGER AND CONTINGENT CONTRACTS -A VIEW
WAGER AND CONTINGENT CONTRACTS -A VIEW
WAGER AND CONTINGENT CONTRACTS -A VIEW..V.LAVANYA1ST YEAR M.L-
BUSINESS LAW.
INDEX1) INTRODUCTION2) WAGER CONTRACTSa. Definition &
meaningb. Essentials of Wagering Contract:3) EFFECTS OF WAGERING
AGREEMENT4) LAWS RELATED TO WAGER5) AGREEMENTS COLLATERAL TO
WAGERING AGREEMENTS6) CONTINGENT CONTRACT7) DEFINITION OF
CONTINGENT CONTRACT8) ESSENTIAL OF CONTINGENT CONTRACT9) RULES
REGARDING CONTINGENT CONTRACTS
INTRODUCTIONSection 30 of the Indian Contract Act deals with the
wagering agreements but this section has not defined wager. Wager
is a promise to give money or moneys worth upon the determination
or ascertainment of an uncertain event. On the other hand section
31 of the Indian Contract Act defines contingent contract as one to
do or not to do something, if some event, collateral to such
contract, does not happen. A overview of the said contracts shall
be as follows.WAGERING AGREEMENTSDefinition & meaningLiterally
the word wager means a bet something stated to be lost or won on
the result of a doubtful issue, and, therefore, wagering agreements
are nothing but ordinary betting agreements. Section 30 of the
Indian Contract Act talks about wagering agreements, which reads as
agreements by way of wager are void. The section does not define
wager. Section 30 states that,Agreements by way of wager are void
and no suit shall be brought for recovering anything alleged to be
won on any wager, or entrusted to any person to abide the result of
any game or other uncertain event on which any wager is made.
Exception in favour of certain prizes for horse racing This
section shall not be deemed to render unlawful a subscription or
any contribution, or agreement to subscribe or contribute, made or
entered into for or toward any plate, prize or sum of money, of the
value or amount of five hundred rupees or upwards, to be awarded to
the winner or winners of any horse race.Section 294A of The Indian
Penal Code not affected Nothing in this section shall be deemed to
legalize any transaction connected with horse Racing, to which the
provisions of S.294A of The Indian Penal Code (45 of 1860)
apply.The expression wager has not been defined in the Indian
Contract Act. A classic definition is however available in the case
of Carlill v Carbolic Smoke Ball Co. A wagering contract is one by
which two persons, professing to hold opposite views touching the
issue of a future uncertain event, mutually agree that, dependant
on the determination of that event, one shall win from the other,
and that other shall pay or hand over to him, a sum of money or
other stake; neither of the parties having any other interest in
that contract than the sum or stake he will so win or lose, there
being no other consideration for making of such contract by either
of the parties. If either of the parties may win but cannot lose,
or may lose but cannot win, it is not a wagering contract.
The above definition excludes event which have occurred. Hence
Sir William Ansons definition, a promise to give money or moneys
worth upon the determination and ascertainment of an uncertain
event, is nearer and more accurate. Essentials of Wagering
Contract:1. Mutual chances of gain and lossThere must be two
parties, or two sides, and mutual chances of gain and loss, i.e.,
one party is to win and the other to lose upon the determination of
the event. It is not a wager where one party may win but cannot
lose, or if may lose but cannot win, or if he can neither win nor
lose, if one of the parties has the event in his own hands, the
transaction lacks an essential ingredient of wager. It is of the
essence of the wager that each side should stand to win or lose
according to the uncertain or unascertained event in reference to
which the chance or risk is taken.2. Two partiesThere must be two
persons, either of whom is capable of winning or losing.3.
Uncertain EventUncertainty in the minds of the parties about the
determination of the event in one way or other is necessary. A
wager generally contemplates a future event; but it may even relate
to an event which has already happened in the past, but the parties
are not aware of its result or the time of its happening.The first
thing essential to wager is that the performance of the bargain
must depend upon the determination of an uncertain event. A wager
generally contemplates future events; but it may even relate to an
event which has already happened in the past, but it may even
relate to an event which has already happened in the past, but the
parties are not aware of its result or the time of its happening.
4. No interest other than stakeNeither party should have any
interest in the happening of the event other than the sum or stake
he will win or lose. To constitute a wager, the parties must
contemplate the determination of the uncertain event as the sole
condition of their contract. The stake must be the only interest
which the parties have in the contract.5. Neither party to have
control over the eventLastly, neither party should have control
over the happening of the event one way or the other. If one of the
parties has the event in his own hands, the transaction lacks an
essential ingredient of a wager. EFFECTS OF WAGERING AGREEMENTA
wagering agreement is void ab initio, and S. 65 has no application
to it. Money paid directly by a third party to a winner of a bet
cannot be recovered from the loser. Even if a loser makes a new
promise to pay for his losses in consideration of his not being
posted, the promise cannot be enforced; but if he gives a cheque in
discharge of his liability, the cheque may not be tainted with
illegality because of the winners promise not to have the name
posted. The cheques will not be enforceable by the original payee,
but may be enforced by a third party holder of the cheque, even if
he knew of the facts leading up to giving of the cheque.It has been
laid down by the Supreme Court, in Gherulal Parekh v.Mahadeo Das
that though a wager is void and unenforceable it is not forbidden
by law. Hence a wagering agreement is not unlawful under section 23
of the Contract Act and therefore the transactions collateral to
the main transaction is enforceable.LAWS RELATED TO WAGERThis
section represents the whole law of wagering now in force in India,
supplemented by the Bombay state by the act for avoiding wagers
(amendments) act 1865, which amended the act for avoiding wagers
1848. Before the act of 1848 the law relating to wagers in force in
British India was the common law in England. By that law an action
might be maintained on a wager, if it was not against the interest
or feelings of third persons, did not lead to indecent evidence,
and was not contrary to public policy. The nature of gambling is
inherently vicious and pernicious. Gambling activities which have
been condemned in India since ancient times appear to have been
equally discouraged and looked upon with disfavour in England,
Scotland, the United States of America and Australia. The Hindu law
relating to gambling has not been introduced in the law of contract
in India. Gambling is not trade and commerce, but res extra
commercium and therefore not protected under art 19(1) or art
301.Section 30 of the Indian Contract Act 1872 is influenced by the
English Gaming Act 1845. Heavily influenced by the English
decisions, the judges have adopted the essential features of that
of the gaming act. However, there is a major difference between the
English and the Indian laws relating to wagers: under the English
Gaming Act, 1845, agreements Collateral to the wagering agreement
are also rendered to be void,38 whereas in India, collateral
agreements are not necessarily void except in Bombay, because The
object of such a collateral contract may not necessarily be
unlawful. Further the Apex Court held that, By law an act might be
maintained on a wager if it was not against the interest or
feelings of a third person, did not lead to indecent evidence and
was not contrary to public policy.As previously mentioned, a number
of Indian companies when incurring losses in foreign exchange
dealings, construct an argument that derivative transactions are in
the nature of wagering agreements, and are hence not enforceable in
Indian Courts under Section , and hence do not give rise to any
liability or financial obligations in respect of repayment of loan
to the bank. As a result of this, many conservative Indian banks
such as the State Bank of India refrained from entering into any
sort of derivative transactions with their clients for a fairly
long time.InGherulal Parakh v. Mahadeodas Maiya, a question arose
as to whether a partnership formed for the purpose of entering into
forward contracts for the purchase and sale of wheat so as to
speculate in rise and fall of price of wheat in future, was a wager
and whether it was hit by Section 30 of the Contract Act. But the
Supreme Court held that such a partnership was not illegal,
although the business for which the partnership was formed, was
held to involve wagering. It was held therein as follows:After the
enactment of the Gaming Act, 1845, a wager is made void but not
illegal in the sense of being forbidden by law, and thereafter a
primary agreement of wager is void but a collateral agreement is
enforceable. There was a conflict on the question whether the
second part of Section 18 of the Gaming Act, 1845, would cover a
case for the recovery of money or valuable thing alleged to be won
upon any wager under a substituted contract between the same
parties: the House of Lords in Hill's case had finally resolved the
conflict by holding that such a claim was not sustainable whether
it was made under the original contract of wager between the
parties or under a substituted agreement between them.So under the
Gaming Act, 1892, in view of its wide and comprehensive
phraseology, even collateral contracts, including partnership
agreements, are not enforceable;As Section 30 of the Indian
Contract Act is based upon the provisions of Section 18 of the
Gaming Act, 1845, and though a wager is void and unenforceable, it
is not forbidden by law and therefore the object of a collateral
agreement is not unlawful under Section 23 of the Contract Act; and
partnership being an agreement within the meaning of Section 23 of
the Indian Contract Act, it is not unlawful, though its object is
to carry on wagering transactions.Wagers Distinguished FromContract
Of InsuranceA transaction of insurance resembles a wager. Every
contract of insurance is a wager if the insurer has no insurable
interest in the event upon which insurance money is payable. The
insurance interest lies normally in that the event is one which is
prime facia adverse to the interest of the insurer. If a insures
cargo which he has loaded on a vessel , his contract is not a wager
because his property is at risk during the voyage; but if has no
cargo on board, the contract is a wager; because if the vessel is
not lost, he loses the amount of premium.Section 6 of the Marine
Insurance Act 1963, provides that every contract of marine
insurance by way of wager is void; and that a contract of marine
insurance is deemed to be a wagering contract where the assured has
not an insurable interest. The (English) marine insurance act 1906,
also provides that a contract or Marine Insurance is deemed to be a
gaming or wagering contract if the insured has no interest in the
adventure.A truck owned by a was transferred benami to b who got it
insured in his own name. The truck was involved in an accident and
it seriously injured a young army officer who claimed heavy damages
from the owner, driver and the benamidar and the insurance company.
It raised the plea that an ostensible owner (a benamidar) had no
insurable interest and that it was a wager for that reason. But
these pleas were negatived by the high court.
Contract Of GamingA gaming contract consist of the mutual
promises which the players of the game necessarily make, express or
by implication, in paying for a stake as to its transfer upon the
result of the game. Such contract may be a wager if the parties are
two. In K.R. Lakshmanan (Dr) v State of Tamil Nadu , the Supreme
Court had an occasion to decide whether horse racing amounts to
gaming as defined under the Madras City Police Act 1888, and the
madras gaming act. It stated:Gambling in a nutshell is a payment of
a price for a chance to win a prize. Games may be of chance or of
skill and chance combined. A game of chance is determined entirely
or in part by lot or mere luck. A game of skill- although the
element of chance necessarily cannot be entirely eliminated- is one
in which success depends principally upon the superior knowledge,
training, attention, experience and adroitness of the
player.Speculative TransactionsA speculative contract is not
necessarily a wagering contract, and must be distinguished from
agreements by way of wager. This distinction comes into prominence
in a class of cases where the contracts are entered into through
brokers. The modus operandi of the defendant in this class of cases
is, when he enters into a contract of sale, to purchase the same
quantity before the vaida day; and when he enters into a contract
of sale, to purchase the same quantity before the vaida day. This
mode of dealing, when the sale and purchase are to and from the
same person, has the effect, of course, of cancelling the
contracts, leaving only differences to be paid. When they are
different persons, it puts the defendant in the position
vicariously to perform his contracts. This is, no doubt, a highly
speculative mode of transacting business; but the contracts are not
wagering contracts, unless it be the intention of both contracting
parties at the time of entering into the contracts, neither to call
for nor give delivery from or to each other. There is no law
against speculation as there is against gambling. A fortiori,
dealings between stockbrokers, whose regular course of business is
periodical settlement of differences, are not presumed to be
wagering agreements. It may well be that the defendant is a
speculator who never intended to give delivery, and even that the
plaintiffs did not expect him to deliver; but that does not convert
a contract, otherwise innocent, into a wager. Speculation does not
necessarily involve a contract by way of wager, and to constitute
such a contract a common intention to wager is essential. It is in
cases of above description that there is a danger of confounding
speculation, or that which is properly described as gambling, with
agreements by way of wager; but the distinction in the legal result
is vital. Every forward contract is to some extent speculative, but
is not a wager or gamble on that account. The distinction between
the two is a narrow one.
AGREEMENTS COLLATERAL TO WAGERING AGREEMENTSContract collateral
to a wagering agreement is not necessarily unenforceable. Section
30 of the Contract Act is based upon the provisions of S. 18 of the
(English) Gaming Act 1845, and though a wager is void and
unenforceable, it is not forbidden by law. Therefore the object of
a collateral agreement is not unlawful under s 23 of the contract
act. But it is otherwise under the (English) Gaming acts of 1845
and 1892, the acts being wider and more comprehensive in
phraseology, because they expressly render void even collateral
transactions. As a result, though an agreement by way of wager is
void, contract collateral to it or in respect of a wagering
agreement is not void except in Bombay state. There is nothing
illegal in the strict sense in making bets. They are merely void
and there would be no illegality in paying them or giving a cheque,
but payment cannot be compelled. But an arbitration clause in a
wagering contract is a part of the contract and not collateral to
it and cannot therefore be enforced. A collateral agreement is not
unlawful under s 23 of the contract act.Apart from Bombay
enactment, there is no statute declaring void agreements collateral
to wagering contract. Nor is there anything in the present section
to render such agreements void. The policy of law in India has been
to sustain the legality of wagers and not to hit at collateral
contracts. It has accordingly been held that a broker or an agent
may successfully maintain a suit against his principal to recover
his brokerage, commission, or the losses sustained by him, even
though contracts in respect of which the claim is made are
contracts by way of wager.The Supreme Court has held that if
agreement collateral to another or of aid in facilitating the
carrying out of the object of the other agreement, which though
void, is not in itself prohibited within the meaning of s 23 of the
contract act, may be enforced as collateral agreement. If on the
other hand it is part of a mechanism to defeat what the law has
actually prohibited, courts will not countenance a claim based upon
the agreement because it will be tainted with an illegality of the
object sought to be achieved, which is hit by s 23 of the contract
act. An agreement cannot be said to be forbidden or unlawful merely
because it results in a void contract. a void agreement when
coupled with other facts may become part of a transaction which
creates legal rights but this is not so if the object is prohibited
or mala in se.THE ACT FOR AVOIDING WAGERS (AMENDMENT) ACT 1865
(BOMBAY ACT 3 OF 1865)The law is however, different in the state of
Bombay. In that state, contracts collateral to or in respect of
wagering transactions are prevented from supporting a suit by the
special provisions of the act for avoiding wagers (amendment) act
1865 (Bombay act 3 of 1865). It was observed:
That act was passed to.to close the doors of the courts of
justice in the presidency to suits upon contracts collateral to
wagering transactions where such collateral contracts have been
entered into or have arisen since the act came into force, a
purpose which it has effectually answered.DerivativesThe position
of derivatives under the common lawTwo English decisions have
caused concern among market participants that certain derivatives
transactions may fall foul of the gaming and wagering laws. In
Universal Stock Exchange v. Strachan the court held that wagering
contracts included contracts for differences. Halsbury defines
contracts for differences as;Agreements between those who are only
ostensible buyers and sellers of stock and shares where the common
interest of the parties is to pay or receive the differences
between their prices on one day and their prices on another day. In
the second decision, City Index Limited v. Leslie, the court
declared that contracts akin to cash-settled derivatives were
contracts for differences. The combined effect of both decisions is
that cash-settled derivatives are wagering contracts and therefore
unenforceable, unless exempted by legislation.The common law
position in Australia has been modified by statute. Section 1141 of
the Australian corporations law protects the following categories
of derivative contracts from the gaming and wagering laws:1.Those
made on the futures market of the futures exchange, or a recognised
futures market,2.Those made on an exempt futures market,3.Those
permitted by the business rules of a futures association, a futures
exchange, or a recognised futures exchange.4.The risk that a
contract may not be enforceable on the grounds of illegality is one
that needs to be addressed. Generally, there is little risk of
exchange traded derivatives falling foul of the gaming and Wagering
laws in either the UK or other common law jurisdictions.Regardless
of the interest of the counterparties, there is no justification
for treating derivative contracts as wagering or gaming contracts.
They are no different from other commercial contracts entered into
by parties on the daily basis. It is true they are more risky than
other commercial contracts and some parties are attracted to
derivatives by the prospects of windfall gains. But these factors
do not make them wagering or gaming contracts any more than
contracts to undertake some highly speculative business. Apart from
the need to remove the existing uncertainties, regulators should
also address the broader question of whether it is appropriate for
gaming and wagering legislation to be applicable in the realm of
financial transactions.However, Indian contract law is indeed
woefully deficient with regard to provisions That clarifies the
legality of derivative contracts. The problematic question whether
Derivative contracts are in the nature of wagering agreements is
not answered by the Act till date and no Amendment to that effect
has been passed either. Under Indian Exchange control laws, an
Indian corporate, being a person resident in India, can Enter into
a foreign currency derivative contract only to hedge an exposure to
foreign exchange risk and not for speculating and yielding profits.
In the case ofRajshree Sugars &Chemicals Limited v Axis Bank
Limited. Since March 2008, Axis Bank and Rajshree Sugars have been
fighting a legal battle over the foreign exchange derivatives
contract, sold by the Bank to the company, thereby resulting in
huge losses for the company estimated to be around Rs. 46-50
crores. The company had refused to make any loan repayment to the
bank contending that the contract was a wagering deal, and hence
untenable on such grounds. The court answered this issue in the
negative. Based on the elucidations of various landmark judgments
on wagers, the court evolved a threefold test to determine whether
the contract is a wager - First, there must be two persons Holding
opposite views touching a future uncertain event; second, one of
those parties is to win and the other is to lose upon the
determination of the event; third, both the parties have no actual
interest in the occurrence or non-occurrence of the event, but have
an interest only on the stake. The case in question fulfilled the
first criteria, but the second was not satisfied because in the
light of the facts of the case, the plaintiff did not always stand
to lose. Citing Indian case law, the judges make an interesting
observation, that though every wagering contract is speculative in
nature, every speculation need not necessarily be a wager. Further,
a common intention to wager is essential, and an element of
mutuality has to be present in the sense that the gain of one party
would be the loss of the other on the happening of the uncertain
event which is the subject matter of wager. In the light of
abovementioned points and also adhering to the Supreme Court
judgment inGherulal Parakh v. Mahadeodas Maiya, the Judges in this
case concluded that the sequence of events in the present case
reflected that the nature of the transaction was not in the form of
a wager. Even though the plaintiff was susceptible to incurring
huge losses yet that by itself could not deem the contract to be a
wager.CONTINGENT CONTRACTA contingent contract is a contract where
performance depends upon some event which may or may not happen.
The performance of a contingent contract becomes due only upon the
happening of non happening of some future uncertain event which may
or may not happen.Example : X contracts to pay Y Rs. 10,000 if Ys
house is burnt. This is a contingent contract as its performance is
dependent upon an uncertain event i.e. burning of Ys house which
may or may not happen.DEFINITION OF CONTINGENT CONTRACTAccording to
Section 31 of the Indian Contract Act 1872, A contingent contract
is a contract to do or not to do something, if some event
collateral to such contract does or does not happen.ESSENTIAL OF
CONTINGENT CONTRACTThe following are the essentials of the
contingent contract,1. There should be a contract to do or not to
do something.2. The happening of the event should be uncertain.3.
The performance of the contract must depend upon the happening or
non-happening of some event.4. The event on which the performance
is to depend must be collateral or incidental to the contract.5.
The event must not be the mere will of the promisor.Essentials with
examples1.The performance must depend upon the happening or non (-)
happening of an event.2. The event must be uncertain, i.e., it may
or may not happen. If the event is sure to happen, the contract is
not contingent but an absolute one.3. The event must be collateral,
i.e., incidental to the contract. An event which is "neither a
performance directly promised as part of the contract, nor the
whole of the consideration for a promise" is known as collateral
event.Example:There was a contract between A and B for the sale of
the American parachute cloth. The delivery was to be made on
receipt of goods in the ship. However, the ship arrived without the
above goods. B sued A for a breach. A contended that the contract
was contingent on the arrival of cloth. Held, the contract was not
contingent but an absolute one and the obligation of A was
independent and not dependent upon the arrival of goods by the
ship. [Ranchhodas v. Nathumal Hirachand & Co.].From the above
characteristics it would appear that wagering agreements, insurance
contracts, contracts of indemnity and guarantee are contingent
contracts.Contingency dependent upon an event or an act of a
party:The performance of a contingent contract depends upon the
happening or non-happening of a collateral event. The word event is
very wide. It includes an act of a party. The party may be a party
to the contract or even a third party. Performance of promise
should not depend upon the discretion of the party to the contract
otherwise it will be invalid. Strictly speaking sale on approval is
not a contingent contract.However, where the sale is subject to
approval of a technical expert it can be called contingent
contract. For example, A buys certain goods subject to his
engineer's approval. It is a contingent contract. Again, a promise
to pay whatever the promisor thinks reasonable is void. However, a
promise to pay whatever a third party thinks reasonable is
valid.RULES REGARDING CONTINGENT CONTRACTSIndian Contract Act has
laid down various rules regarding contingent contracts which are as
follows:1. Contracts contingent on the happening of a future
uncertain event:Contingent contracts dependent upon the happening
of an uncertain future event cannot be enforced until the event has
happened. If the event becomes impossible such contracts become
void (Sec. 32). Contingent contract to do or not to do anything, if
an uncertain future event happens, cannot be enforced by law unless
and until that event has happened. Conversely, contingent contract
dependent on the happening of a certain event, can be enforced only
on the happening of that event, can be enforced only on the
happening of that event. It the event becomes impossible, such
contracts becomes void as provided under section 32.Examples:(1) A
promises to pay B Rs. 1,000 if he marries C. Rs. 1,000 are payable
only if B marries C(2) A promises to pay B Rs. 1,000 if he marries
C. C died before the marriage. The contract becomes void.2.
Contracts contingent on the non-happening of a future uncertain
event:Contingent contract to do or not to do anything if an
uncertain future event does not happen, can be enforced when the
happening of that event becomes impossible, and not before. (Sec.
33)Example:A promise to pay Rs. One lakh to B if B's ship does not
return. The ship is sunk. The contract can be enforced after the
ship is sunk and not before.3. Contracts contingent on future
conduct of a living person:Where a contract is contingent upon the
way a person will act at an unspecified time, the event shall be
considered to become impossible when such person does anything
which renders it impossible that he should so act within any
definite time, or otherwise than under further contingencies. (Sec.
34)Example:A agrees to pay B Rs. 10,000 if B marries C. C marries
D. If bigamy is not allowed, then the marriage of B with C must be
considered impossible although it is possible that D may die and
that C may afterwards marry B.4. (i) Contracts contingent on the
happening of an event within a fixed time:Contract contingent on
the happening of an event within a fixed time becomes void if such
event does not happen or the event becomes impossible before the
time fixed.Example:A promises to pay B a sum of money if a certain
ship returns within a year. The contract may be enforced if the
ship returns within the year, and becomes void if the ship is burnt
within the year.(ii) Contracts contingent on the non-happening of
an event within a fixed time:Contracts contingent on the
non-happening of an event within a fixed time may be enforced by
law if such event does not happen, or it becomes impossible before
the expiry of fixed time. (Sec. 35).
Example:A promises to pay B a sum of money if a certain ship
does not return within a year. The contract may be enforced if the
ship does not return within the year, or is burnt within the
year.5. Contract contingent on an impossible event void:Contingent
agreements to do or not to do anything if an< impossible event
happens are void, whether the impossibility of the event is known
or not to the parties to the agreement at the time when it is made.
(Sec. 36).Examples:(1) A agrees to pay B Rs. 1,000 if two straight
parallel lines should cut each other.(2) A agrees to pay B Rs.
1,000 if B will marry A's daughter C. C was dead at the time of the
agreement. The agreement is void.CONTINGENT CONTRACTS AND WAGERING
AGREEMENTS The difference between contingent contracts and wagering
agreements has been something that has troubled me in the past, and
I was rather satisfied to finally allay my doubts sometime ago. The
distinction is a fine one, and principally involves the following
Sections of the Indian Contract Act, 1872:Section 30:Agreements by
way of wager void.Agreements by way of wager are void; and no suit
shall be brought for recovering anything alleged to be won on any
wager, or entrusted to any person to abide the result of any game
or other uncertain event on which any wager is madeSection 31:
Contingent Contract definedA contingent contract is a contract to
do or not to do something, if some event, collateral to such
contract, does or does not happen.From a plain reading of the above
provisions, it is clear that there are similarities between the two
in fact, one would conclude that every wagering agreement
wouldnecessarilyhave to be a contingent contract, since a wager by
definition is the placing of a premium on the occurrence of an
event that is uncertain. The very nature of a contingent contract
too is the lack of certainty as to whether the event will happen,
and if a contract is made conditional on an event that will happen
for sure, it cannot be designated as a contingent contract as such
event merely becomes a condition precedent to performance of the
contract.The distinction between contingent contracts and wagering
agreements lies principally in the fact that contingent contracts
(subject to other relevant provisions of law like S. 30) are valid,
legal, contracts whereas all wagering agreements are void
agreements. Therefore, as a starting point one must indicate that
all wagering agreements are contingent contracts, but that the
converse is not true. Contingent contracts are a larger set,
whereas wageringagreementsare just one species (an admittedly
illegal species) of contingent contracts.A fundamental difference
between the two isthe interest of the partiesin the uncertain
events occurrence or non-occurrence. In a wagering agreements, the
occurrence of the event is merely incidental and it is the reward
contingent on the event that the parties are really concerned about
as such. In contingent contracts, however, the event and
itsoccurrencecarries a significance over and above the financial
transaction contingent on the event. Thus, the interest of the
parties in the occurrence of the event is one distinguishing factor
between the two types of agreements.The next significant difference
is that in wagering agreements,promises are necessarily reciprocal,
in the sense that there will always be a winner and a loser,
andeitherparty has something to gain one way or another. In
contingent contracts, the promise can simply be unilateral, such as
for a person to compensate you if your house is burnt
down(Illustration to Section 31). Another difference is that in
wagering agreements, theentire agreement hinges on the future
uncertain event. The occurrence of the event is the be-all and
end-all of the contract as it were. In contingent contracts, there
can be various other conditions and aspects to the contract and the
entire agreement need not depend on that event alone. The event is,
in other words, collateral to the agreement as such.Therefore,
there are several significant differences between the two kinds of
agreements and while at first blush it might appear that the
difference is almost illusory, the above discussion should indicate
the fundamental differences between the two kinds of
agreements.CONCLUSIONAs section 30 of the Indian Contract Act 1872
reads about agreements by way of wager, void. Further The Contract
Act does not define what constitutes a wager or a wagering
agreement. It only mentions that such agreements will be void and
unenforceable and no action can lie to either recover anything that
is due under a wager or for performance of a contract that is in
the nature of a wager. A wager is in the nature of a contingent
contract but is prevented from being enforceable by Section
30.Hence Section 30 should be amended to define the word wager.
Since a lot of inconvenience and ambiguity have been faced by the
judiciary while dealing with the issue of wagers, specifically as
to what all constitute wagers and what all comes under the ambit of
wagers. As different jurists and in different judgments the ambit
of wagers is defined in different ways. In other words the scope of
section 30 needs to be widened.The enforceability of a contingent
contract is very clear i.e. it comes into force only when the
required contingent event has happened. Till the happening of such
event, it would not come into force. And as seen from the above
cases, the arbitration agreement cannot operate independently if
the contract is unenforceable.************************
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